IMO this is a good move. The counter arguments are:
- Delivery apps are struggling and they have to charge 30% to survive in a cut-throat market (many delivery services competing).
- Why not charge the consumer? Restaurants are struggling and take the fees off of them and charge consumers.
I feel like delivery companies are "double dipping", they charge delivery fee and they charge 30% to the restaurants as commission. That's unsustainable. Charge the consumer not the restaurant. It has all kinds of nasty disincentives - "We won't list your restaurant on our super popular delivery app because you didn't agree to pay 30% commission to us." Fuck that.
Delivery services should just charge by the mile/time of the delivery it takes. That's kind of like Uber but instead of driving around a human, they're driving around food.
5.50 delivery charge is based on the time/distance of the restaurant to the house. If they pool multiple orders, they it should be amortized and split. Personally, I tip because I have to but not because I want to. Tipping is a shitty culture and needs to be abolished like Japan. Just pay the employees enough. There should be laws that protect service workers and guarantee their wage. I am happy to know that $8.00 is the delivery fee upfront because of increased salary for service workers than having to "voluntarily" tip $2.50. That's the job of the delivery company to pay, not for the consumers to pony up atop $5.50 delivery fee.
You assume these companies are just throwing random costs at things because they can. I assure you they've A/B tested the hell out of what will maximize usage. Turns out, the population is cheap AF. Imagine, in a consumer pays the cost model, they see DoorDash charges $10 for this delivery, on a $15 meal, instead of today seeing $3.99 delivery fee, $1 service fee, and then on the back end charges the restaurant $5 from the $15 item.
That doesn't even account for the driver fee that brought you the food. So if you really want to be fair and charge the customer, you're looking at $15 on a $15 meal. Consumers would most definitely reject that.
The reality is these high end delivery services cost a ton to run and they've come up with clever ways to obfuscate the real cost to avoid being punished in the market. I 100% support what SF is trying to do here, but honestly, this is no different than what cell phone companies and cable operators have been doing for the last 20 years. It'll take an active investigation from the FTC to change their ways and I hope we see that followed up on at some point.
Anecdotally I have asked my delivery people. Most won't say anything (perhaps they are afraid I'm a "secret shopper"?) but the few who have have confirmed they don't get the same amount from DoorDash. There is one regular delivery person with whom I have a good rapport who has showed up from instacart, doordash and postmates; he says doordash and instacart continue to steal tips but postmates stopped.
The story I've heard is that there's a bit of creative accounting involved -- the driver's compensation from the delivery service is reduced in proportion to their tip.
Ironically, restaurants are by far the largest tip-stealers.
For example, in DC, where minimum wage is $14.00 per hour, wait staff need only be paid a wage of $4.55 per hour on the basis that their tips will make up the difference.
I believe this applies to any job where gratuities are expected to make up a significant fraction of income, hence delivery service drivers also.
That rule is unfortunately in the minimum wage law of every US state that has a minimum wage, as well as in the federal minimum wage law.
Whether you believe this is fair or not (I do not) some restaurants engage in actual tip stealing by letting the managers or owners simply pocket all the tips. This was made illegal in 2012 but that rule was revoked in 2017
restaurants can and do increase their prices on grubhub to recoup the 30% commission. unless the restaurant is prohibited from having different prices vs takeout, it doesn't really matter whether the service charges the restaurant, the customer, or both.
In the UK at least, most of the delivery apps will punish a restaurant if the prices differ between the restaurant's own website and the prices through deliveroo/hungryhouse/ubereat.
Some restaurants get round it by having a paper voucher delivered with each order saying "30% off, only if you order direct by telephone not through an app", but I believe even that goes against the T&C's with the apps.
> I feel like delivery companies are "double dipping", they charge delivery fee and they charge 30% to the restaurants as commission. That's unsustainable.
They absolutely are double dipping (or maybe it's closer to itemizing?), but I'm not sure why it's wrong or unsustainable. Finders' fees are a thing.
There are 4+ companies in this space, so if there were really that much room to cut prices, one player would.
The other huge issue is that this is SF implementing public policy with private money. Normally we'd call this a tax, but doing it this way has fewer safeguards and doesn't share the tax load fairly.
There are multiple competing delivery services and at least some of them have a history of charging below cost. It would initially appear that this is a good problem to leave to the free market: in the absence of regulation, the price charged will get pretty close to the delivery company's cost of doing business.
The market, as such, changed overnight: tables in restaurants are worthless (for some period) and internet delivery is presumably a roaring trade. Restaurants have unexpected imbalances in their revenue streams; presumably if this was expected to go on a long time, they'd be renegotiating their contracts with GrubHub et al on the new basis.
This is an emergency order, for the period until restaurants can re-open for dining in. The mayor has apparently decided that local, small businesses need to be saved from the terms of their contracts with the third-party aggregators due to the suddenness of the change.
I'm a little surprised that the mayor has the authority to tear up those contracts, in any case.
I guess because it's a double sided market with exclusivity deals. Consumers aren't going to have multiple service accounts just to get access to delivery. So if you want to reach the most people, you need to make deals with the devil. In this case, DoorDash, Caviar, or GrubHub.
It made sense from a brand/marketing cost back when things were normal, but now that it's the primary way to fund your operation, the cost-benefit doesn't make sense anymore, but you're still locked in.
1) some restaurants want to have their own employee's deliver food as a way to avoid paying these costs to the delivery services like uber eats, door dash, etc -- is that something that is "against the rules" if you have one of these services?
2) if you have one service like uber eats at your restaurant, can you have more than one?
3) are there monthly minimums that restaurants have to pay?
A lot of these delivery service fees make sense when its a portion of the business that sort of "grows the restaurants footprint" -- sort of everybody wins mentality -- but in this case if by mandate you can't have people in your restaurant, then these delivery services essentially are granted temporary monopolies on a restaurants entire business -- so makes sense that something has to be done when such a dramatic change has occurred.
Stay-at-home orders (dine-in not allowed, takeout discouraged) gave the delivery apps way too much buying power over restaurants. The market isn't free because restaurants can't really choose their customers anymore, so it makes sense to have safeguards.
Did it? Markets don't reach equilibrium instantly, and as most people have noticed, we live in unpredictable and high-risk times, from a business perspective.
Arguably some of the first sellers of security certificates were wildly overpricing their product. Should the government really have stepped in?
[I don't have a dog in this fight, as I think having strangers prepare your food during a pandemic is unwise.]
https://news.ycombinator.com/item?id=22838727